By Kerry Sutherland, certified financial planner at Alexander Forbes
Helping your teenager start good money habits now will serve them well for the rest of their life.
Learn to manage money for life
Money management is about learning how to earn, save, spend, borrow and repay money responsibly. For the most part, our children learn about money by watching how their parents deal with money. Giving them small sums of money and allowing them responsibility for it teaches them lifelong money management skills.
Peer pressure and brands
Today’s teenager is increasingly shopping online, and with boredom at home – especially during the Covid-19 pandemic – it is easy to be lured by branded clothing, the latest iPhone or take-away from their favourite restaurant. However, they need to understand that this spend, with debit or credit cards, directly affects their bank account. Peer pressure and social media can also be triggers for spending on unnecessary items. Rather than bringing happiness, these additional items can cause trouble by creating financial problems.
Cash is key
Sticking to cash can help a teenager to physically see how much money they are spending, rather than simply swiping a credit card that mom or dad will pay off. This will also help them to stop spending money they don’t have.
Set a savings goal
Help your teenager to set a savings goal for a big ticket item such as an electronic gadget or sports item, and to put money away into an appropriate savings account for this every month. Encourage your older teenager to get a part-time job, as working hard to contribute towards their savings goal is a great money lesson. Help them by discussing how much money should be saved, and how much should be spent. Within one family, two kids can have different approaches to money, with one being a saver and the other a spender despite being raised in the same way.
From pocket money to part-time jobs
Giving pocket money, or an allowance, is another way to help teach your children to manage money. You might want to consider if part of the payment is for doing household tasks.
You can also be your child’s first lender. If they want a special item and don’t have the money, discuss a repayment plan with them before simply handing over the cash. A part-time job for older teenagers could also help them not only to start saving, but also to grow in confidence, learn skills and network.
Tips for teens to save money
- Create a simple budget to keep track of where you spend your money. Start by listing your income and subtracting your expenses.
- Open the right bank account or savings product.
- Make the most of student discounts.
- Sell unwanted items.